The conceptual framework

 

The conceptual framework

The framework for the preparation and presentation of financial statements sets out the concepts that underlie financial statements for external users. It is designed to:

• assist the Board of the IASB in developing new standards and reviewing existing ones

• assist in harmonizing accounting standards and procedures

• assist national standard setting bodies in developing national standards

• assist preparers of financial statements in applying IASs/IFRSs and in dealing with topics not yet covered by IASs/IFRSs

• assist auditors in forming an opinion as to whether financial statements conform with IASs/IFRSs

• assist users of financial statements in interpreting financial statements

• provide those interested in the work of the IASB with information about its approach to the formulation of IFRSs.

The scope of the framework

The framework deals with:

• the objective of financial statements

• the qualitative characteristics that determine the usefulness of information in financial statements

• the definition, recognition and measurement of the elements from which financial statements are constructed .

• concepts of capital and capital maintenance.

Underlying assumptions of the framework

The framework identifies two underlying assumptions:

(1) the accruals basis of accounting

(2) the going concern basis.